MANHATTAN (CN) - More than 100 car dealerships claim that Carfax monopolizes the market on vehicle history reports, forcing them to pay tens of thousands of dollars for a substandard product, in a federal antitrust complaint.
Lead plaintiff Maxon Hyundai Mazda and 119 other companies accuse Carfax of violating the Sherman and Clayton Acts.
Carfax is one of 10 venders of vehicle history reports, or VHRs, approved by the National Motor Vehicle Title Information System, an electronic database created under the Anti-Car Theft Act of 1992.
"Carfax is the oldest and by far the dominant provider of VHRs," the 55-page complaint states.
Carfax acquired more than 90 percent of the report market through "exclusivity agreements with numerous major players in the auto industry," according to the complaint.
"Through these exclusive agreements, Carfax requires the plaintiff auto dealers to purchase Carfax VHRS on every used car sold in 37 of 40 Certified Pre-Owned ('CPO') auto sales programs of domestic and foreign-based automobile manufacturers, and every used car plaintiff auto dealers list for sale on the two largest websites providing classified used automotive listings, Autotrader.com and Cars.com," the complaint states.
"By contractually committing these two websites to include hyperlinks to Carfax VHRs and to exclude VHRs of any other provider, Carfax has stigmatized any listing without such a link in the eyes of consumers who infer that the absence means that the car has a blemished history. As a result of these exclusivity agreements, therefore, the plaintiff auto dealers are effectively compelled to purchase Carfax VHRs for their used car inventory and supply them tree of charge to persons shopping for used cars, despite the fact that other suppliers of VHRs offer more reliable VHRs at substantially lower prices than those charged by Carfax."
Carfax charges smaller car dealers $10,000 per year and tens of thousands of dollars more for larger companies, the plaintiffs say.
"The monthly price paid by the dealer for an unlimited number of VHRs is determined by Carfax based on the average number of used automobiles and light trucks in the dealer's inventory," the complaint states. "That monthly fee ranges from $899 per dealership location for some dealers, to $1,549 per dealership location for other dealers."
This arrangement also hurts consumers, the dealers say.
"Carfax's anticompetitive practices have thwarted competition in the publication and sale of VHRs in the United States, which has diminished the quality of VHRS, increased their prices, and caused harm to customers," the complaint states. "In a free and competitive market for VHRs, where they were not compelled to purchase Carfax VHRs at prices inflated by the antitrust violations alleged herein, plaintiff auto dealers would have the unfettered opportunity to purchase VHRs of superior reliability from alternative suppliers at competitive prices. Carfax also utilizes these inflated revenues to disparage and falsely malign dealers in order to mislead consumers into believing its VHRs were necessary and accurate. A free and competitive market for VHRs unrestrained by Carfax's antitrust violations would also provide great benefit to consumers, who would find greater availability of more reliable VHRs."
The dealerships demand at least $50 million and want Carfax enjoined from enforcing anticompetitive agreements with manufacturers and classified ad agencies.
They are represented by Leonard Bellavia with Bellavia Blatt Andron & Crossett.
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